Yesterday, the Division of Corporation Finance rolled out a revamped web page on sec.gov. Broc noted a few weeks back how the home page on sec.gov was redesigned, and now it looks like Corp Fin has followed suit with a reordered page that makes it easier to find useful guidance and information (once you get used to it).
While the page is still cast in the trusty blue, red and grey that we have grown accustomed to, the previously cluttered navigation bar on the far left now appears to be dedicated to linking to the “What’s New” page, rather than including links to the largely the same things that are available on the body of the page or elsewhere on sec.gov. Further, a new “Staff Guidance and Interpretations” section in the left column of the page consolidates all of the legal and accounting guidance, including the CD&Is, the Financial Reporting Manual, No-Action, Interpretive and Exemptive Letters, SABs, SLBs, CF Disclosure Guidance and Division Policy Statements.
On the right side of the page, there are separate links for “special categories of issuers,” i.e., asset-backed, foreign issuers and small business, an EDGAR search function, and, under the “Contact Us” header, links to the portals for submitting requests for interpretive advice and no-action letters. One nifty utility under the “Contact Us” header is the “Find the Office Responsible for Company Filings” search function, which allows you to enter the company name, CIK number, ticker symbol and/or SIC code and come up with the Assistant Director office that a company is assigned to.
Having been heavily involved in a prior redesign of the Corp Fin web page, I am a big fan of this new approach, as I think it makes it much easier to access the Division’s guidance all in one place, rather than having to hunt around for all of the various pieces depending on whether the information is “legal” or “accounting” related.
Advisory Committee on Small and Emerging Companies Rolls On
With the enactment of the JOBS Act back in April, one may have thought that the SEC’s Advisory Committee on Small and Emerging Companies would have folded up their tents and gone home. Luckily, they have not (in fact I don’t think they were even issued tents), as there is still work to be done in terms of figuring out ways to improve capital access for small and emerging companies and reduce regulatory burdens on smaller companies, as evidenced by their agenda for a meeting taking place tomorrow at the Commission. The Advisory Committee plans to talk about the JOBS Act, market structure issues, and scaling of disclosure and corporate governance rules for smaller public companies. Hopefully, the Advisory Committee can serve as a useful resource to the Commission as it considers rules changes under the JOBS Act, and can also serve as a springboard for future small business initiatives that the Commission may want to undertake once it gets the JOBS Act rulemaking out of the way.
Deal Cube Tournament: Round One; 11th Match
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Tune in tomorrow for the webcast – “Nasdaq Speaks ’12: Latest Developments and Interpretations” – to hear the latest practical guidance from senior Nasdaq Staffers Arnold Golub, Mike Emen, Lisa Roberts, Jurij Trypupenko and Manny Alicandro who will be discussing everything from the latest rule changes to whom do you call to resolve an issue, and much more. Please print off these course materials in advance of the webcast.
Nasdaq Proposes Changes to Director Independence Listing Rules
Nasdaq is proposing to broaden a rarely used exception in its corporate governance listing rules which permits one non-independent director to serve on the audit, nominating or compensation committees under exceptional and limited circumstances and with proper disclosure, provided that the board determines such service is in the best interests of the company and its shareholders and the term of service does not last more than two years.
Currently, a listed company can’t utilize this exception for a director who has a family member who is an employee of the listed company, even if that family member is not an executive officer of the company, if the director is not independent for an unrelated reason; however, that same family relationship would not otherwise preclude the director from being considered independent. In order to eliminate this distinction, Nasdaq proposes to amend Rules 5605(c)(2)(B), 5605(d)(3) and 5605(e)(3) to allow a director who is a family member of a non-executive employee of a listed company to serve on the listed company’s audit committee, compensation committee or nominating committee under exceptional and limited circumstances.
In making the affirmative determination that the non-independent director’s membership on a committee is required by the best interests of the company and its stockholders, Nasdaq still expects that a board of directors would consider any family relationship between the non-independent director and a non-executive employee of the company. However, Nasdaq does not believe that the mere existence of this family relationship alone should create an outright prohibition on the use of the exception.
The SEC has put the proposed rule changes out for comment, with comments due within 21 days of publication in the Federal Register.
Deal Cube Tournament: Round One;10th Match
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Only two months ago, President Obama signed the Jumpstart Our Business Startups Act into law, and in that very short time we have seen the transformation of the way in which IPOs are done with the fast-track implementation of Title I’s provisions for “emerging growth companies.” Whether Title I’s permissive “on-ramp” provisions for emerging growth company IPOs actually encourages more companies to go public ― particularly in the face of the current market headwinds ― remains to be seen. In any event, the Corp Fin Staff has worked hard to provide some practical guidance very quickly in order to ease the transition to the post-JOBS Act world of offerings.
At the same time, we are 60 days into the 90-day timeframe that the JOBS Act specifies in Title II for the adoption of rules permitting general solicitation and general advertising in Rule 506 offerings when sales are only to accredited investors (along with comparable revisions to Rule 144A), and we have not yet seen any proposed rule changes; however, there is perhaps still time for proposals to be issued with a short comment period, or the SEC could decide to adopted “interim final rules” given the very short rulemaking deadline.
On the crowdfunding front under Title III, we have all been reminded that the exemption is not operative today, rather it is only effective upon SEC rulemaking due by the end of the year. Of all of the provisions of the JOBS Act, crowdfunding continues to capture the imagination of many, although there has emerged some skepticism as to whether the exemption, with all of the conditions contemplated by the statute and to be ultimately fleshed out by the SEC, could actually emerge as a viable means for conducting very small offerings, or whether it might end up like current Regulation A, which is rarely used today due to the difficulties of conducting offerings under that exemption.
Speaking of Regulation A, the new Section 3(b)(2) exemption contemplated by Title IV is also not operative until the SEC acts on the mandated rulemaking, and to date we haven’t heard much word on when that might take place. Given the other JOBS Act-mandated rulemaking with short deadlines and the still unfinished Dodd-Frank Act rules, I have got to think that Regulation A+ may get put on the back-burner for now. Finally, the Corp Fin Staff’s guidance on Titles V and VI clarified the immediate effectiveness of those changes to the Exchange Act registration thresholds, making avoidance of registration a reality for those issuers (bank holding companies and regular issuers) who exceeded the old holder-of-record thresholds but not the new thresholds at the end of their last fiscal year.
Upon reflection, it seems that quite a bit has been accomplished under the JOBS Act in just a couple of months, but of course much more remains to be done. More importantly, those of us who have policed and worried about Section 5 for all of these years are now starting to get used to the brave new world of securities laws after the JOBS Act.
More on our “Proxy Season Blog”
We continue to post new items regularly on our “Proxy Season Blog” for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:
– Activist Project: Repealing Classified Boards in S&P 500 Companies
– Money Managers Increasing Activism on Governance: But Quietly
– The Impact of Majority Withhold Votes
– 2012 U.S. Season Preview: E&S Proposals
– GRId Information to Change When Proxy Filed
– Shareholder Proposals: Trends from Recent Proxy Seasons
Deal Cube Tournament: Round One; 9th Match
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I’ve added 7 more companies to CompensationStandards.com’s failed say-on-pay list for 2012. We are now at 39 companies in ’12 that have failed to garner major support – with Digital River garnering support only in the teens (19.2%; going even lower than Chiquita Brands)! And Safety Insurance Group became the first company to fail after receiving a ‘For’ recommendation from ISS, as noted in this Semler Brossy blurb. Hat tip to Karla Bos of ING Funds for keeping me updated!
More on “The Mentor Blog”
We continue to post new items daily on our blog – “The Mentor Blog” – for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:
– California Considers Legislation to Repeal its Corporate Long-Arm Statute
– ABA Spring Meeting: Corp Fin Notes
– The Bought Deal Bible
– Risky Business: What If the CEO Has a Risky Hobby?
– ABA’s Internal Controls Comment Letter to COSO
Deal Cube Tournament: Round One; 8th Match
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As noted by Keith Bishop in his blog, Oxfam America has sued the SEC in the US District Court in Massachusetts for failing to comply with Congress’ mandate to adopt regulations governing disclosures by resource extraction issuers under Section 1504 of Dodd-Frank (here’s more in Jim Hamilton’s blog). First the SEC gets sued for rulemaking too fast, now too slow…
“Occupy the SEC”
A few weeks ago, this Washington Post article entitled “Occupy the regulatory system!” notes that a former SEC Staffer is part of the movement. The article drew a few hundred comments. Funny that an “Occupy the SEC” group is based in NYC and not DC, where the SEC’s HQ is based.
Meanwhile, a OWS-related group has filed what appears to be its first amicus brief, urging the Second Circuit to uphold U.S. District Judge Jed Rakoff’s controversial rejection of the SEC’s $285 million settlement with Citigroup.
Our June Eminders is Posted!
We have posted the June issue of our complimentary monthly email newsletter. Sign up today to receive it by simply inputting your email address!
Deal Cube Tournament: Round One; 7th Match
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Yesterday, Corp Fin revised its confidential submission processes for foreign private issuers so that they are treated like emerging growth companies for filing drafts, etc. This is good news as the same procedure for all types of drafts should makes it easier for us to remember. This process change is effective on a going-forward basis.
Here is the new paragraph added to Corp Fin’s processes:
In addition, foreign private issuers, whether submitting draft registration statements pursuant to this foreign issuer non-public submission policy or as an emerging growth company under the JOBS Act, will be required, at the time they publicly file their registration statements, to also publicly file their previously submitted draft registration statements and resubmit all previously submitted response letters to staff comments as correspondence on EDGAR. All staff comment letters and issuer response letters will be posted on EDGAR in accordance with staff policy. For foreign private issuers making non-public submissions pursuant to this policy, and not pursuant to the procedures available to emerging growth companies, this requirement will only apply to registration statements where the initial draft submission is made after May 30, 2012.
Our New “Board Meeting/Board Committee Disclosure Handbook”
We continue to post new items daily on our blog – “The Mentor Blog” – for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:
– Survey: Cybersecurity Risks Foremost on Auditor’s Mind
– Do You Have The Correct Authorized Number Of Directors?
– And Even More Board Trends…
– ‘Do I need to quit my job?’
– And More Board Trends…
– Notes from PLI’s “SEC Speaks” Conference
Deal Cube Tournament: Round One; 6th Match
As noted in these rules (and keep sending more pics for the next tourney), please vote for two of the following four cubes below:
In the “Cady Bar the Door” Blog, David Smyth notes recent examples of SEC’s Enforcement going after lawyers – just as Director Rob Khuzami promised in a speech last June for defense counsel who engage in “questionable tactics” to gain advantage for their clients involved in SEC investigations. As David mentions in his blog, in his speech, Khuzami noted one hilarious episode in which a witness in investigative testimony – looking for a toe-tapping signal his lawyer had been warned against during a break – “extended [his foot] so far [under the table] that he was almost doing a split.” Also see this DealBook piece entitled “With New Firepower, SEC Tracks Bigger Game” – and this OnWallStreet piece entitled “SEC Whistleblower Tip Rate: 7 A Day.”
Meanwhile, Bloomberg reported last week that Enforcement has stopped investigating Lehman (a rumor which was then disputed in this NYT piece). And the SEC announced that it has barred one of its former Staffers from practicing before the Commission – Section 102(e) actions are rare and almost unheard of for SEC alumni – over12 hours of billables on the Stanford case…
Early Bird Discount Ends Tomorrow! “Proxy Disclosure Conference” Lineup!
We are very excited to announce that Corp Fin Director Meredith Cross will be part of our “7th Annual Proxy Disclosure Conference” on October 8th in New Orleans (and by video webcast). Just look at this beautiful baker’s dozen of panels for this Conference:
1. An Interview with Meredith Cross, Director of the SEC’s Division of Corporation Finance
2. Say-on-Pay Disclosures: The Proxy Advisors Speak
3. The Executive Summary & Other Ways for Disclosure to Facilitate Solicitation
4. The Latest SEC Actions & CD&A Developments: Compensation Advisors, Clawbacks, Pay Disparity & More
5. Refining Your Pay-for-Performance Message & Addressing the Impact of Your Vote
6. Getting the Vote In: The Proxy Solicitors Speak
7. Dealing with the Complexities of Perks
8. Conducting – and Disclosing – Pay Risk Assessments
9. Overcoming Form 8-K Challenges
10 Handling the Golden Parachute Requirement
11. Challenges for Smaller Companies: Their First Year
12. How to Handle Preliminary Proxy Statements
13. How to Handle the ‘Non-Compensation’ Proxy Disclosure Items
Register Now for Early Bird Rates – Act by May 31st: For the early bird discount rate, register by May 31st. This Conference is paired with “Say-on-Pay Workshop: 9th Annual Executive Compensation Conference” and they will be held October 8-9th in New Orleans and via Live Nationwide Video Webcast.
– What led you to write the book? What can shareholders take away from it?
– What is the primary message that boards can take away from the book?
– What is the biggest surprise you found while writing the book?
Deal Cube Tournament: Round One; 5th Match
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I’ve added 14 more companies to CompensationStandards.com’s failed say-on-pay list for 2012! We are now at 32 companies that have failed to garner major support – with Chiquita Brands garnering support only in the teens (19.8%; see Mark Borges’ analysis of this failure)! Hat tip to Karla Bos of ING Funds for keeping me updated!
And Hercules Offshore became the first (41% support in ’11 and 48% in ’12) – and Kilroy Realty became the second (49% support in ’11 and 30% in ’12) – company to fail two years running…
And this list doesn’t include the recent voting results from Cablevision Systems – a company which did not have say-on-pay on its ballot this year because the frequency is triennial (per page 26 of their proxy statement; triennial was the choice of shareholders last year) – whose members of the compensation committee received less than majority support presumably due to pay issues. The company has a plurality vote standard so there is no direct impact from this vote. And this result doesn’t get picked up in the “failed SOP” count even though I would consider it to be a more serious failure than a nonbinding SOP vote…
Webcast: “Looking Out for #1: How to Manage Your Career”
Tune in tomorrow for the webcast – “Looking Out for #1: How to Manage Your Career” – to hear Peggy Foran of Prudential Financial, Charlotte Lee of Lee Hecht Harrison|DBM, Randi Morrison of TheCorporateCounsel.net and Axiom and Susan Wolf of Global Governance Consulting discuss the latest developments in job choices and promoting yourself from within your current job, as well as hunting, recruiting and how to market yourself.
Deal Cube Tournament: Round One; 4th Match
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In the wake of the much-hyped Facebook IPO, we are slowly finding out about alleged circumstances that have already led to a bevy of lawsuits. As I tweeted yesterday, will this IPO be full employment for litigators? But Facebook is not alone, it’s hard to forget the gunjumping adventures of the recent Groupon IPO – or even how a Playboy interview found its way into the Google IPO prospectus.
Recently, the SEC’s Office of the Chief Accountant provided guidance in a letter to the International Swaps and Derivatives Association about whether implementation of certain provisions of Dodd-Frank that relate to OTC derivatives would affect hedge accounting.
Former CEO Settles Reg FD Case with SEC: Six Years After the Conduct
Last week, the SEC’s Enforcement Division announced this litigation settlement with Edward Marino, former Presstek CEO, over previously-filed charges that he aided and abetted Presstek’s violations of Regulation FD by agreeing to pay $50k without admitting or denying the allegations. What is remarkable is that this settlement comes nearly six years after the conduct…
Speaking of the “good ole days,” how about a stock option backdating case? Last week, the Ninth Circuit affirmed a verdict and order requiring former Maxim CFO to pay penalties and disgorgement of over $2.1 million in SEC v. Jasper.
Deal Cube Tournament: Round One; Third Match
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Did you see how many comments have been received on the rulemaking petition submitted to the SEC by a group of academics about political disclosure spending last summer? Over 250,000! Most are form letters but 500 are unique, which is still very high for a petition. Remember this is not a SEC rulemaking! The bizarre thing is that this development doesn’t quite jibe with the fact that shareholder proposals on this topic have not received overwhelming support by shareholders so far this proxy season (on average about 27%, per this blog).
Anyways, I attended an interesting conference from The Conference Board about corporate political spending last week. Like I imagine for many of you out there, this is an area that I confess to not know much about – but needed to get up-to-speed fast given how it’s the hottest topic of the proxy season and not one that is likely to die down anytime soon. But it’s not just hot for the proxy season – it’s hot for the masses. Here are notes from a panel of journalists that bear this out:
Eliza Newlin Carney from Roll Call was rubbing her hands about what a good story corporate political spending is: lots of big numbers that people are interested in: money, power, lots of people interested in outcomes – what she called “a perfect storm” – probably making a lot of the company attendees rather worried. Peter Cook from Bloomberg asked some good questions and affirmed that he gets thousands of interested comments on his stories on the subject, a level he said was high.
Tom Hamburger from the Washington Post professed a desire to hear more from the audience, and said any “progress” on disclosure was probably illusory because it still lacks bipartisan support and that identified leaders in the area of disclosure are still able to direct money to secret efforts, as evidenced by the action of several health insurers to provide money to the Chamber of Commerce to defeat Obamacare.
All the journalists agreed corporate money in politics was going to keep them employed on the beat for a very long time. Also, Trevor Potter wrapped up with an assessment of the DC Circuit Court decision on the Van Hollen v. FEC case. Potter thought the Supreme Court would probably come down on the side of disclosure and not agree to hear any appeal that might be lodged.
Over the course of the day, I became more familiar with ALEC (American Legislative Exchange Council) and ALECexposed.org. I thought it was interesting that not much was said about the popular discontent with corporate influence, a la Occupy Wall Street. My favorite panel involved the topic that might matter the most – what is the board’s role in all of this? Let me know what you think about that…
Does Corporate Political Spending Belong in SEC Disclosure Documents?
The movement to require companies to disclose their corporate political activities is not a new one. It goes back decades as a bill seeking that is floated nearly every year as far back as I can remember. Of course, this notion never had the type of popular support that it now enjoys in the post-Citizens United era. The question remains – is this type of disclosure appropriate for filings made with the SEC or should it be mandated through another avenue?
On the one hand, the purpose of disclosure filed with the SEC is to enable investors to make investment decisions. There are cogent arguments that corporate political spending disclosure is meaningful to investors because they would be able to see if a company is doing something that can blow up its reputation – something that can happen fast in today’s social media world, particularly with politics as kindling. Boycotts are now much easier to form online and that can hurt a company’s bottom line.
On the other hand, some argue that they have talked to institutional investors and most say they won’t make their investment decisions based on this type of disclosure. Encouraged by the Center for Political Accountability, as noted in this press release, over 100 companies now provide detailed disclosure of their political spending on their websites. Are investors reading those disclosures?
Or is this one of those topics where SEC disclosure is mandated for the social good more than investors? There are plenty of examples of that today – think conflict minerals or global security risk and terrorism – or even go back in time to Y2K. This likely will be a debate that will be settled by Congress, as so often happens…
More on our “Proxy Season Blog”
We continue to post new items regularly on our “Proxy Season Blog” for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:
– Norges Bank on Proxy Access
– Research: Who Companies Name As Proxies With Power to Vote Proxies Received
– Corp Fin Allows Companies to Omit Arbitration Proposals
– Western Union Moves to Declassify, But Drops Proxy Access Plan
– Chevedden Submits Brief to Fifth Circuit in KBR Appeal
– Corp Fin Reverses Position on Net Neutrality Proposals
Deal Cube Tournament: Round One; Second Match
As noted in these rules (and keep sending more pics for the next tourney), please vote for two of the following four cubes below:
